South African gold

Joke over

Curtain down on the farce of Harmony's bid for Gold Fields

WHAT wonders the failure of a bid can do for your share price. Last October's bid from loss-making Harmony for bigger, profitable Gold Fields of South Africa was already within hours of dribbling to its end last Friday when South Africa's high court mercifully applied the knife: the two-stage bid, it ruled, had in law been dead since mid-December because its extension had not followed the rules. On Monday, Harmony shares soared by nearly 15%, before closing 9.8% up.

The bid had been impudent at best. Harmony offered Gold Fields shareholders nothing more solid than its own shares, at a mere 13% premium to Gold Fields' pre-bid share price. The bid soon became a farce, as both share prices slid, but Harmony's slid faster. Though Russia's Norilsk Nickel had provisionally pledged its 20% of Gold Fields, other acceptances together totalled less than 12%. By its expiry date on Friday, with the paper offer 15% short of Gold Fields' market value, the bid was clearly dead, court or no court.

Harmony had spent over $25m on it, Gold Fields probably more. In rand terms, the shares were down by 42% and 30% respectively, even after both rose on Monday—thanks in part to rand weakness against the dollar. That weakness provides some hope to South Africa's miners. Harmony will need it: in the quarter to March it lost $355m pre-tax, and it is now planning to lay off nearly 12,000 employees.

The only winners have been public-relations men, the newspapers that gleefully printed the rival advertisements—Gold Fields alone ran 15 different ads—and, of course, the lawyers hired to fight umpteen regulatory hearings and the legal actions launched by Gold Fields, not just in South Africa but in Britain and America, too.

And now? With the death of the bid, which under South African law greatly restricted Gold Fields' freedom of action, many expect to see that company playing footy-footy with Norilsk, which is to hive off all its gold holdings in a new company, Polyus, that may seek a western listing. Polyus might indeed soothe Harmony's unhappy holders by offering real money for the 11.5% of Gold Fields now in their company's hands. But Bernard Swanepoel, Harmony's chutzpah-rich chief executive, who played the lead role in its costly bid, will be lucky if he survives merely with egg on his face. The mineworkers are not alone in thinking it is time he got the chop.